BofA: Integrated Device Technology's Samsung Exposure Could Limit Upside

While Integrated Device Technology Inc IDTI is exposed to multiple diverse product cycles in memory interface, the company's exposure to the volatile communications market could limit upside, according to Bank of America Merrill Lynch. 

The Analyst

BofA's Vivek Arya upgraded IDT from Underperform to Neutral and raised the stock’s price target from $30 to $34. 

The Thesis

IDT has a strong history of execution and free cash flow generation, as well as exposure to multiple product cycles, Arya said in a Tuesday note. (See the analyst's track record here.) 

The analyst forecast 8-10-percent sales growth for 2019-2020 compared with a prior estimate of 6-9 percent, as the shift to DDR5 is expected to drive “sustainable double-digit growth” in memory interface sales in the coming years. 

IDT has a diverse portfolio, Arya said. 

“We also like IDTI’s exposure to multiple, diverse product cycles in wireless charging, auto/industrial sensors, optical (GigPeak), advanced timing and RF." 

IDT is still strongly exposed to Samsung on the consumer and communications side, the analyst said.

Communications growth is expected to remain muted until further 5G investments begin, constraining further upside to IDT, Arya said. 

“Samsung/mobile still accounts for most sales, and the majority of Samsung-exposed semi suppliers have sounded cautious thus far this earnings season.”

Price Action

IDT shares were down 2.48 percent at $5.30 at the close Tuesday. 

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